Gautam Kundu vs Enforcement Directorate

Shivakant Prasad, J

This is an application for bail under Section 439, read with Section 436A of the Code of Criminal Procedure, 1973 on behalf of the petitioner who has

prayed for his enlargement on bail on any condition.

The petitioner has been arraigned as an accused along with other accused persons in connection with the M.L Case No. 03/2015 arising out of ECIR

No. KLZO/02/2014 under Section 4 of the Prevention of Money Laundering Act, 2002.

Firstly, an application for bail was preferred by the petitioner before this Hon’ble Court and the same was registered as C.R.M. No. 3216 of 2015

when this Hon’ble Court was pleased by its order dated 08.04.2015 to grant interim bail to the petitioner for a period of two weeks for

performance of his deceased father’s last rites.

Thereafter the petitioner again preferred an application for bail before this Hon’ble Court which was turned down by the order dated 21.07.2015

passed in C.R.M. No. 6285 of 2015.

Background fact of this case is that Manoj Kumar, Assistant Director, Enforcement Branch being the authorized officer of Central Government under

Prevention of Money Laundering Act, 2002, lodged a complaint before the learned Chief Judge, City Sessions Court, Kolkata (hereinafter referred to

as the learned Trial Court) with a prayer for taking cognizance and to conduct trial of the offences punishable under Section 4 of the Prevention of

Money Laundering Act (as amended) and the scheduled offences. In the complaint, it was alleged that an investigation was conducted against Rose

Valley Group of Companies which revealed that Rose Valley Real Estate Construction Ltd. (RVRECL) repeatedly issued secured non convertible

debentures for the years from 2001 to 2008 to more than 49 persons raising huge amount of money from public at large allegedly without filing offer

document to regulatory authority or without following the norms of SEBI.

It is also alleged that though the issue of debenture was for a specified project, but the funds have been allegedly diversified and utilized in other

business which have been mobilized through the issue of secured non convertible debentures and the funds accumulated through other schemes like

Ashirwad, have also allegedly been transferred to regional office at RVRECL and a part thereof was allegedly utilized for its project at Mandarmoni.

It is further alleged that the income of RVRECL and the expenditure of the said company had allegedly accumulated a negative reserve and similarly

RVRECL’s income and total expenditure also accumulated negative reserves. On scrutiny of Balance Sheet of the said company indicates

alleged siphoning of funds, cross share holding amongst the group of companies with an intent to show fake capital to change the colour of the public

deposits into the company’s capital and the funds have been accumulated by the company by making false promises to the common people and

the said two companies have mobilized the fund under various schemes upon using manipulated wordings on the deposit of certificates to avoid

regulatory bodies like SEBI, RBI etc. to bypass the law and regulations for raising money from the common public. Thus, the Rose Valley Group of

companies has allegedly laundered money in various banks as fixed deposit to project it as untainted money and thereby committed offence punishable

under Section 3 of the Prevention of Money Laundering Act, 2002 which is punishable under Section 4 of the said Act.

That prior to initiation of the proceedings of the Directorate of Enforcement, the RVRECL had received a notice on 09.04.2010 from the Registrar of

Companies under Section 234(3A) of the Companies Act, 1956 and in compliance of the said notice the RVRECL replied and submitted the

documents before the ROC vide letters dated 21.04.2010, 28.04.2010 and 11.05.2010.

During the course of enquiry conducted by the SEBI the Adjudicating Officer of SEBI namely, Mr. Piyush Gupta passed an order on 26.03.2013 vide

Adjudication Order No. PG/AO-19/2013, under Section 15(i) of the SEBI Act, 1992 read with Rule 5 of SEBI (Procedure for Holding Enquiry and

imposing Penalties by Adjudicating Officer imposed a penalty of Rs. 1 crore to the RVRECL for violation of provision of Section 11C (2) and 11C (3)

of SEBI Act, 1992.

On 26.04.2013 SEBI, being represented by its Assistant General Manager filed a complaint case under Sections 24/27 of the SEBI Act read with

Section 11C (3) of the Act, Section 405 of the Indian Penal Code vide Complaint Case NO. 14214 of 2013 before the learned Chief Metropolitan

Magistrate, Calcutta against the RVRECL and the present petitioner and eight other Directors and office bearers of RVRECL. It is submitted on

behalf of the petitioner that on the self same date i.e. 26.04.2013, the learned Chief Metropolitan Magistrate, Calcutta on the prayer of the complainant

i.e. SEBI took cognizance against the said company under Sections 24/27 of the SEBI Act and it would be evident that on the day of filing the

authorized representative of the complainant was personally absent before the learned Chief Metropolitan Magistrate, Calcutta and after taking

cognizance against the aforesaid company and persons, the learned Chief Metropolitan Magistrate, Calcutta issued summons to the said company.

It is submitted that the instant case relates to issuance of debentures to the tune of Rs. 12.82 crores which arose out of Complaint Case No. 14214 of

2013 preferred by SEBI. The petitioner was the Chairman of the said company who has/had collected Rs. 12,363.63 crores from the general public.

It is contended on behalf of the petitioner that by order dated 17.4.2017 passed in C.R.R. No. 3071 of 2015 by this Hon’ble Court directed the trial

Court to frame charge against the accused persons within two months from the date of communication of the order and if the charge is framed, trial

be concluded as expeditiously as possible without granting any unnecessary adjournment to either of the parties. Although the order was passed more

than 2 ½ years back, but till date charge has not been framed.

Accordingly, it is submitted that the accused petitioner Gautam Kundu was arrested on 25th March, 2015 and by now he has completed the custody

period of four years eleven months reported in except that he was allowed interim bail on 08.04.2015 to enable him to attend him shradh ceremony of

his deceased father but his subsequent application for bail was rejected on 27.01.2015 as the bail application under Section 439 Cr.P.C. was not heard

for a period of two years and ultimately the same was not pressed by the petitioner and thus dismissed.

It is submitted that the offence alleged by the defacto complainant under Section 3 for money laundering provides that whosoever directly or indirectly

attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime

including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money

laundering and Section 4 of the said Act is the conviction clause which enjoins punishment with rigorous imprisonment for a term which shall not be

less than three years but which may extend to seven years and shall also be liable to fine. Thus it is argued that the proceeds of crime as per the

definition of Section 2(1)(u) proceeds of crime means any property derived or obtained, directly or indirectly, by a person as a result of criminal

activity relating to a schedule offence or the value of any such property or where such property is taken or held outside the country, then the property

equivalent in value held within the country or abroad and that the offence alleged in the instant case does not fall within the scheduled offence.

It is further submitted that twin conditions embodied in Section 45 of the Act have been declared ultra virus by the judgment of the Hon’ble

Supreme Court in case of Nikash Tarachand Shah Vs. Union of India and Anr. reported in 2018 (11) SCC 1 to argue that twin restrictions on the

discretion of the Court to grant bail to the accused under Section 45 of Prevention of Money Laundering Act has been done away with as the

provision is manifestly arbitrary and used in arbitrary fashion to deny bail for offences under the said Act and struck down as unconstitutional

observed in paragraphs 11, 12 and 13 thus:-

“11. Having heard learned counsel for both sides, it is important to first understand what constitutes the offence of money laundering. Under

Section 3 of the Act, the kind of persons responsible for money laundering is extremely wide. Words such as “whosoeverâ€, “directly or

indirectly†and “attempts to indulge†would show that all persons who are even remotely involved in this offence are sought to be roped in. An

23 important ingredient of the offence is that these persons must be knowingly or actually involved in any process or activity connected with proceeds

of crime and “proceeds of crime†is defined under the Act, by Section 2 (u) thereof, to mean any property derived or obtained directly or

indirectly, by any person as a result of criminal activity relating to a scheduled offence (which is referred to in our judgment as the predicate offence) .

Thus, whosever is involved as aforesaid, in a process or activity connected with “proceeds of crime†as defined, which would include concealing,

possessing, acquiring or using such property, would be guilty of the offence, provided such persons also project or claim such property as untainted

property. Section 5 3, therefore, contains all the aforesaid ingredients, and before somebody can be adjudged as guilty under the said provision, the said

person must not only be involved in any process or activity connected with proceeds of crime, but must also project or claim it as being untainted

property.

Under Section 4 of the Act, the offence of money laundering is punishable with rigorous imprisonment for a minimum period of three years which

may extend to 7 years and fine. Also, under 24 the proviso, where the proceeds of crime involved in money laundering relate to a predicate offence

under paragraph 2 of Part A of the Schedule, the sentence then gets extended from 7 years to 10 years.

Under Section 5 of the Act, attachment of such property takes place so that such property may be brought back into the economy. Coming now to

Chapter VII of the Act with which we are really concerned, Section 43 lays down that Special Courts to try offences under the Act are to be

designated for such area or areas or for such case or class or group of cases as may be specified by notification. Section 44 is very important in that

the Section provides for the trial of a scheduled offence and the offence of money laundering together by the same Special Court, which is to try such

offences under the Code of Criminal Procedure as if it were a court of sessions. Under Section 46, read with Section 65 of the Act, the provisions of

the Code of Criminal Procedure apply to proceedings before the Special Court and for the purpose of the said provisions, the Special Court shall be

deemed to be a court of sessions.â€​

It is submitted on behalf of the petitioner, since the petitioner has completed one half of the maximum period of imprisonment specified for the offence

under the said Act 2002, the petitioner has preferred the instant application for bail under Section 436A of the Code of Criminal Procedure but the

learned trial Judge was of the opinion that the case is an exceptional case which cannot be equated with the cases where the offenders involved in

common phenomenon other than the economic offences and rejected prayer of the petitioner to release him on bail. It is argued that the provision of

Section 436A of the Code relates to a maximum period for which an undertrial prisoner can be detained during investigation, inquiry or trial. It is also

provided that in no case, an undertrial prisoner can be detained beyond the maximum period of imprisonment for which he can be convicted for the

offence. Accordingly, it is urged that since the petitioner has been in custody for more than four and half years, his detention period is beyond one half

of the maximum period as the maximum punishment provided for the offence under Section 4 of the Act, 2002 is for a term of seven years and even

the trial has not been initiated.

The trial Judge while dealing with the application under Section 436A of Cr.P.C. has observed that there is a merit of further detention of further

custody since the matter is very sensitive. Similar to that of 167(2) of the Code, Section 436A of the Code of Criminal Procedure provides that the

learned Judge loses his jurisdiction to remand the under trial for custody after expiry of a period of one half of the maximum punishment and for such

reasons the order rejecting the prayer for release of the accused petitioner has been assailed as per se illegal and in violation of Section 436A of

Criminal Procedure Code. To support his contention learned counsel for the petitioner relied on a decision in case of Bhim Singh Vs Union of India

reported in 2015(13)SCC 605 to the observation in the paragraphs of 4, 5 & 6 thusâ€

“4. Section 436 -A reads as follows:“436-A. Maximum period for which an under trial prisoner can be detained.â€"Where a person has, during

the period of investigation, inquiry or trial under this Code of an offence under any law (not being an offence for which the punishment of death has

been specified as one of the punishments under that law) undergone detention for a period extending up to one-half of the maximum period of

imprisonment specified for that offence under that law, he shall be released by the Court on his personal bond with or without sureties:

Provided that the Court may, after hearing the Public Prosecutor and for reasons to be recorded by it in writing, order the continued detention of such

person for a period longer than one-half of the said period or release him on bail instead of the personal bond with or without sureties:

Provided further that no such person shall in any case be detained during the period of investigation, inquiry or trial for more than the maximum period

of imprisonment provided for the said offence under that law.

Explanation.â€"In computing the period of detention under this section for granting bail, the period of detention passed due to delay in proceeding

caused by the accused shall be excluded.â€​

Having given our thoughtful consideration to the legislative policy engrafted in Section 436-A and large number of under trial prisoners housed in the

prisons, we are of the considered view that some order deserves to be passed by us so that the under trial prisoners do not continue to be detained in

prison beyond the maximum period provided under Section 436-A.

We, accordingly, direct that jurisdictional Magistrate/Chief Judicial Magistrate/Sessions Judge shall hold one sitting in a week in each jail/prison for

two months commencing from 1-10-2014 for the purposes of effective implementation of Section 436-A of the Code of Criminal Procedure. In its

sittings in jail, the above judicial officers shall identify the undertrial prisoners who have completed half period of the maximum period or maximum

period of imprisonment provided for the said offence under the law and after complying with the procedure prescribed under Section 436-A pass an

appropriate order in jail itself for release of such undertrial prisoners who fulfil the requirement of Section 436-A for their release immediately. Such

jurisdictional Magistrate/Chief Judicial Magistrate/Sessions Judge shall submit the report of each of such sittings to the Registrar General of the High

Court and at the end of two months, the Registrar General of each High Court shall submit the report to the Secretary General of this Court without

any delay. To facilitate compliance with the above order, we direct the Jail Superintendent of each jail/prison to provide all necessary facilities for

holding the court sitting by the above judicial officers. A copy of this order shall be sent to the Registrar General of each High Court, who in turn will

communicate the copy of the order to all Sessions Judges within his State for necessary compliance. WP (Crl.) No. 310 of 2005â€​

It is also argued that Section 436A of the Code of Criminal Procedure is no way related to the gravity of the offence. The only consideration required

for invoking the said provision is the period of detention of an under trial prisoner and the factum whether any delay has been caused by the said

accused person and the offence is not punishable with death.

The learned counsel for the petitioner further refers to a case in a decision of Subrata Chattoraj Vs. Union of India reported in (2016) 2 SCC 1

wherein it has been observed that the delay in investigation and trials is a wholesale breach of human rights guaranteed under Article 21 of the

Constitution of India and criminal justice breaks down at a point when expeditious trial is not attempted while the affected parties are languishing in

jail. Reliance was placed in the cited decision in case of Nimeon Sharma v. State of Meghalaya, (1980) 1 SCC 700 : 1980 SCC (Cri) 32,8 observing

thatâ€

“Fair, just and reasonable procedure is implicit in Article 21 of the Constitution and that Article 21 guarantees a right to the accused to be tried

speedily. It is in the interest of all concerned that the guilt or innocence of the accused is determined as quickly as possible in the circumstances. What

is important is that right to speedy trial flowing from Article 21 encompasses all stages, namely, the stage of investigation, inquiry, trial, appeal, revision

and retrial.â€​

To counter the above submission of the learned counsel for the petitioner, on behalf of Enforcement Directorate, learned counsel has adverted to the

provision of Section 436A of the Code of Criminal Procedure giving emphasis to the proviso clause that the Court may after hearing the public

prosecutor and for reasons to be recorded by it in writing, order the continued detention of such person for a period longer than one-half of the said

period or release him on bail instead of the personal bond with or without sureties; provided further that no such person shall in any case be detained

during the period of investigation, inquiry or trial for more than the maximum period of imprisonment provided for the said offence under that law.

Therefore, for the reasons to be noted the Court is well empowered to order continued detention in jail instead of releasing him on personal bond or on

surety bond, however in no case the petitioner can be continued with the detention beyond the period of seven years.

Now, the Court has to find as to whether delay in trial was caused by the petitioner and other accused person.

The opposite party has by an affidavit submitted that the petitioner is the chairman cum director of Rose Valley Real Constructed Limited and the

investigation has been concluded with the submission of the charge sheet which reveals that Rose Valley Group Company has repeatedly issued

secured non convertible debentures in the year 2001-02, 2004-05, 2005-06 & 2007-08 to more than 49 persons in each Financial Year and raised a

total sum of Rs. 12.82 crores from general public without following any norms of SEBI. And investigation further revealed that though the issue of

debentures was for specific project but the funds have been diversified and utilized in other business which have been mobilized through the issue of

secured non-convertible debentures. That Rose Valley illegally and fraudulently collected public money from the general public from different states

amounting more than Rs. 12363.63 crores.

The learned Special Judge-PMLA Court fixed the matter for consideration of charge on several occasions however the same could not be proceeded

due to dilatory tactics adopted by the different accused persons in the case and the detailed list to argue that the petitioners and other accused persons

are instrumental in causing delay in the proceeding of which are noted hereunder:-

That on 19.04.2017 bail application was moved on behalf of accused B.K. Mallick and Arun Mukherjee.

That on 13.06.2017 bail application was moved on behalf of Sibamoy Dutta and Ashok Kumar Saha.

That on 30.06.2017 retraction petitions were filed by petitioner and Amit Banerjee.

That on 01.08.2017 petitions filed by B.K. Mallick and Sudhir Shaw seeking copies of certain documents.

That on 25.08.2017 discharge application under Section 239 of the Code of Criminal Procedure filed by Amit Banerjee.

That on 08.09.2017 discharge application under Section 239 of the Code of Criminal Procedure filed by Ashok Kumar Saha.

That on 27.10.2017 bail application filed by Arun Mukherjee.

That on 27.11.2017 bail application filed by Arun Mukherjee.

That on 20.04.2018 another petition filed by Amit Banerjee asking for permission to visit Assam.

That on 10.05.2018 a petition filed by petitioner for granting of parole.

That on 28.09.2018 discharge application under Section 239 of the Code of Criminal Procedure filed by B.K. Mallick.

That on 27.11.2018 petition filed by B.K. Mallick for permission to visit Canada.

That on 10.04.2019 again a bail petition filed by Arun Mukherjee on health on health ground.

That on 10.07.2019 a bail petition under Section 436A of the Code of Criminal Procedure filed by petitioner.

It is evident from the charge sheet that the petitioner is responsible for the acts and affairs of the company as the Chairman of Rose Valley Group of

Company who planned and designed the illegal schemes to mobilize deposits from the innocent investors including deposits under the scheme of issue

of debenture with false assurance of high return and thereby generated huge sums and diverted and thereby laundered the money for different

purposes by befooling the common public and has committed offence under Section 3 read with Section 70(1) and (2) of PMLA Act punishable under

Section 4 of the Act. Thus, the petitioner is involved in a grave economic crime having serious social ramification and in the larger interest of the

society. In my considered view, the learned trial Judge has rightly turned down his prayer for release under the provision of Section 436A of the Code

of Criminal Procedure by taking in view the proviso clauses for his continued detention till the conclusion of the trial.

Accordingly, in the context of what has been discussed above, the prayer for release of the petitioner Gautam Kundu is refused considering the

enormity of the crime and his involvement in many other cases relating to Rose Valley cheat fund scam case.

Accordingly, the C.R.M. No. 8345 of 2019 is dismissed, however, with the direction to the trial Court to frame charge on the date fixed and endeavour

to conclude the trial as per the provision of Section 309 of Cr.P.C. without giving any accommodation of time to any of the parties and to dispose of

the case as expeditiously as possible with further direction to the Enforcement Directorate to produce all its witnesses on the time schedule framed by

the trial Court but on their failure to do so the petitioner is given liberty to renew his prayer for release under the provision of Section 436A of Cr.P.C.

if delay is caused in conclusion of the trial for non production of the witnesses on the part of the Enforcement Directorate within the scheduled time

framed for holding the trial of the case by the trial Judge, otherwise not, if the delay is occasioned intentionally by any of the accused persons including

the petitioner.

Let a copy of this order be communicated to the learned Trial Court.

Urgent certified photocopy of this order, if applied for, be supplied to the parties upon compliance with all requisite formalities.